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Port Hedland council’s lease bill claim in $81m Auzcorp collapse

The Town of Port Hedland is claiming $1.74 million from a Pilbara property and accommodation group sent under by the mining downturn owing tens of millions of dollars to banks, suppliers and subsidiaries.

Administrators to Auzcorp Pty Ltd say the council’s claim is subject to a legal dispute and yet to be verified but it relates to an accommodation village near the Port Hedland airport leased to the failed group in 2009. Auzcorp and eight of its subsidiaries were put into the hands of Ferrier Hodgson administrators last month, owing $16.3 million to the Commonwealth Bank.

A further $62.8 million is owed to the collapsed subsidiaries and other group companies, with $2 million due to trade suppliers.

On Ferrier Hodgson’s recommendation, a creditors meeting called last Thursday to decide Auzcorp’s future was adjourned to October to allow administrators to pursue a potential recapitalisation with interested parties, including directors.

Auzcorp, controlled by Pilbara entrepreneur Haniff Kassim, drew most of its income from the 255-room airport accommodation camp and the 91-room Mia Mia House in the Desert hotel in Newman.

Both raked in revenue during the iron ore boom, with Mia Mia House charging up to $325 a night during the region’s accommodation squeeze. However, occupancy and room rates dropped sharply from 2014 as mining spending in the Pilbara fell, putting Auzcorp under financial pressure.

The airport venue and Mia Mia House were closed and put on care and maintenance last year, leaving Auzcorp little capacity to service its debt.

The group’s plight was exacerbated by the plunge in Pilbara property prices, which left Auzcorp underwater on five Port Hedland houses it also owns. Commonwealth Bank holds security over the houses and will recover some of its debt. However, unsecured creditors’ hopes of a recovery rest with a deed of company arrangement.

Ferrier Hodgson has also blamed poor management of cash flow and working capital and a focus on turnover rather than profit for the collapse.

Auzcorp faced legal claims from several creditors. A statutory demand from Water Corp in June eventually tipped it over.

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